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Remember A Charity leads sector campaign for VAT exemption on charitable Wills

14 March 2017

Remember A Charity is calling on government to make charitable Wills exempt from VAT and to re-examine the recent decision to increase probate fees. This comes as part of the consortium’s wider campaign with government to secure fiscal incentives that will encourage legacy giving among the full population, not only those affected by Inheritance Tax (IHT).

The consortium estimates that VAT exemption on charitable Wills could double the number of people leaving a gift to charity in their Will, generating a further £800 million for good causes for the relatively low cost to government of £375,000[1].

“Charities are facing two major threats to legacy income,” says Rob Cope, Director of Remember A Charity. “We know that IHT exemption is a powerful motivator for financial advisers to raise the issue of legacy giving with clients and to encourage people to give.

“But from April, the IHT threshold is going up and it will be relevant to fewer people, which means that solicitors will have to approach the topic of legacy giving in a different way. Together with the hike in probate fees, this is a double whammy that could have a detrimental impact on legacy giving and their family estates.

“We are calling on government to introduce a VAT exemption on the cost of writing all Wills that include a charitable gift. While this change would come at a relatively low cost to government, this could make a huge difference to charities, giving solicitors and Will-writers cause to highlight the option and benefits of legacy giving with all clients. We need to ensure that legacy giving is not just something reserved for the wealthiest in society; that it is something we are all given the opportunity to do.”

Legacy giving remains the single largest source of voluntary income, generating £2.5 billion a year. Last year there were 37,262 charitable estates in the UK. Remember A Charity’s research delivered in partnership with the Behaviour Insights Team and University of Bristol shows that advisers who inform clients about the opportunity of legacy giving, write significantly more charitable Wills. This can help to close the gap between the public’s willingness to give and the number of legacy gifts charities receive. It is estimated that if all professional advisers reference legacy giving, this could generate a further 15,000 charitable estates a year.

The Institute of Fundraising and Charity Finance Group are supporting Remember A Charity’s call for VAT exemption on charitable Wills and the broader principle of developing fiscal incentives that benefit anyone who chooses to leave a legacy to charity.

Andrew O’Brien, Head of Policy and Engagement at Charity Finance Group, says: “Legacies are a growing and important way that the public supports good causes. It is critical that we make giving as easy and effective as possible. So it is important that the government does not undermine existing incentives through increasing probate fees on estates that leave money to charity which could have significant unintended consequences. The government should also align its tax policy so that unseen taxes such as VAT support the government’s objectives to increase charitable giving.”

Mike Smith, Head of Public Affairs at the Institute of Fundraising, says; “This small change in the cost of writing a Will could make a massive difference in the number of people who decide to leave a gift to charity.  The Government has been really supportive of efforts to increase legacy giving, and we are encouraging them to back this small reduction in tax to help raise millions more for good causes.”

 

Legacy giving

  • Legacy income is currently worth more than £2.5 billion a year to good causes, representing 13% of all voluntary income[2].
  • Fewer than 10% of estates are currently affected by IHT[3], significantly restricting the number of people who can benefit from this fiscal incentive on legacy giving.
  • Remember A Charity research[4] shows that 35% of the UK aged 40+ are ‘happy to give a small amount to charity in their Will’ once they’d taken care of family and friends. The problem is that only 6.3% do it[5].
  • It is estimated that if all professional advisers reference legacy giving, this could generate a further 15,000 charitable estates a year. The annual cost to the Treasury, based on these estimates, could be therefore in the region of £375,000 for the additional gifts generated and £750,000 in total.
  • A conservative estimate of these additional gifts’ value would be a further £72 million a year for good causes, which give an ROI of 191:1. However, if legacy giving became an integral part of the discussion and used sympathetic language, and the additional Wills generated were at the same level as current giving patterns and values, we estimate that this could almost double the number of people who leave a gift in their Will – potentially generating an additional £800 million a year for charitable causes.
  • A single Will costs in the region of £125 + VAT (£150). By simply offering to waive the VAT for those Wills that include a charitable Will it would do two things:

1. Ensure that all solicitors and Will-writers mention the option of charitable giving. This alone has the potential to double charitable giving for those advisors who currently don’t prompt about legacy giving

2. Offer a small but simple financial incentive that helps to normalise legacy giving

 

[1] The annual cost to the Treasury of VAT exemption on charitable Wills is estimated to be in the region of £375,000 for additional gifts generated and £750,000 in total.

[2] Legacy Foresight, 2016

[3] Institute for Fiscal Studies, 2015

[4] TNS, 2008

[5] Smee & Ford, 2016

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